Lusail Company builds office buildings. The office buildings are constructed under contract with reputable buyers. During 2016, Lusail Company began construction of an office building for AlKhor Corporation. The total price is $20 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: 2016 2017 2018 2019 2020 2021 Costs incurred during the year $2,000,000 2,000,000 4,750,000 4,750,000 2,250,000 2,250,000 Estimated costs to complete as of year-end $6,000,000 6,000,000 1,250,000 1,500,000 656,250 0 Billings during the year $1,000,000 1,000,000 5,000,000 5,000,000 4,000,000 4,000,000 Cash collections during the year $900,000 900,000 4,300,000 4,300,000 4,800,000 4,800,000 To properly fulfil the above construction project, Lusail Company leased a machine from Qatar Leasing Corporation on June 30, 2018. The lease agreement calls for Lusail Company to make semiannual lease payments of $562,907 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Lusail Company's incremental borrowing rate is 10%, the same rate Qatar Leasing uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each financial year. The fair value of the machine is $3 million. In addition, Lusail Company issued on January 1, 2019 $1,500,000, 4%, 5-year bonds. Interest on the bonds is paid semimanual on June 30 and December 31. The market interest for bonds of similar risk and maturity was 6%. Lusail Company was aware that according to the U.S. GAAP, companies are allowed to switch from the effective interest method to fair value method with little justification. On December 31, 2020, the market interest rate increased to 8%, thus prompting Lusail Company to switch to the fair value method to account for its bonds. On the same date, the fair value of the bond issue was estimated at $1,342,735. Although, IFRS does allow the use of fair value to account for liabilities, there are many restrictions and requirements. Unfortunately, Lusail Company did not meet these requirements; a matter that enforced the company to follow the effective interest method in reporting for its bonds in the financial statements instead of the fair value method. Show and discuss how the above financial transactions will affect the income statement and the statement of financial position for Lusail Company on December 31, 2016 and December 31, 2020 assuming that the company reports with U.S. GAAP and uses the percentage of completion method for its office building contracts. (3 Marks) Show and discuss how the above financial transactions will affect the income statement and the statement of financial position for Lusail Company on December 31, 2016 and December 31, 2020 assuming that the company reports under IFRS and uses the cost recovery method for its office building contracts. (3 Marks)